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Exam CCBA topic 1 question 167 discussion

Actual exam question from IIBA's CCBA
Question #: 167
Topic #: 1
[All CCBA Questions]

A business analyst has determined that a project should be worth $2,750,000 in four years if her company decides to pursue the project. Assuming the rate of return on the investment is six percent, what is the minimum amount of funds the organization should invest in this project?

  • A. $2,585,000.00
  • B. $2,749,001.99
  • C. $2,178,257.57
  • D. $165,000
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Suggested Answer: Answer: D is incorrect. This is not a valid calculation of the present value formula. 🗳️
To find the solution to this answer, you'll need to use the present value formula which is Present value=future value(1+i)n, where i is the interest rate and n is the power of the number of time periods. In this instance, it's $2,750,000(1.262) for the present value of $2,178,257.57.
If the cost of the project is more than the present value, it's not a good investment for the organization.
by 17b7c4c at Oct. 15, 2024, 8:48 a.m.

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17b7c4c
1 month, 1 week ago
Selected Answer: C
C. $2,178,257.57
upvoted 1 times
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